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Senate Passes Energy Bill Without House Tax Package

By Steven Mufson
Washington Post Staff Writer
Friday, December 14, 2007

The Senate passed an energy bill with overwhelming bipartisan support last night but only after a Republican filibuster threat forced Democratic leaders to ditch the bill's tax package, which would have extended tax breaks for wind and solar projects while reducing breaks for the biggest oil and gas companies.

The revised bill, approved by a 86 to 8 vote, would boost fuel efficiency standards for new automobile fleets to 35 miles a gallon by 2020, increase energy efficiency standards for appliances and buildings, and set a mandate for the vastly expanded use of ethanol and other biofuels.

The measure will go back to the House and, if approved, to President Bush, who said last night that he would sign it.

"Could this bill have been better? Of course it could have," said Senate Majority Leader Harry M. Reid (D-Nev.), comparing it to a split decision in a boxing match. But he said it was still "a good bill."

The final bill represents a major setback for the automobile industry, which had fought a losing battle to blunt new fuel efficiency standards. Those standards, the first increase in 32 years, had widespread support because of high oil prices and concerns about U.S. dependence on imported petroleum.

The bill is a major victory for farm states, which would benefit from the mandated use of 36 billion gallons a year of corn-based ethanol and other biofuels by 2022. Critics say, however, that the new mandate could strain water resources, boost food prices, worsen fertilizer runoff problems and cost scores of billions of dollars in federal subsidies over the next decade.

Wind, solar and environmental groups expressed dismay about the death of the bill's tax package and the earlier shelving of a requirement that utilities rely on renewable energy for at least 15 percent of their power generation. Wind and solar firms said they needed an extension of tax credits and incentives to make plans.

"For the wind industry, it looks like coal in our Christmas stocking," said Gregory Wetstone, senior director for government and public affairs at the American Wind Energy Association.

Daniel J. Weiss, senior fellow and director of climate strategy at the Center for American Progress, said the Senate had given "the green light to more-efficient cars and renewable fuels but has a red light for renewable electricity from wind, solar and other clean sources."

Elizabeth Martin-Perera, climate policy specialist at the Natural Resources Defense Council, said, "Congress should be congratulated for taking the first step in the sprint to solve global warming." But she added, "We're disappointed that there were some things left on the cutting-room floor."

Earlier in the day, the Senate failed for a second time to block a Republican-led filibuster on the energy bill with its tax provisions intact. GOP leaders made a stand against a proposed $21.8 billion, 10-year tax package that had the support of Senate Finance Committee Chairman Max Baucus (D-Mont.) and the committee's ranking Republican, Sen. Charles E. Grassley (Iowa).

The bid to end debate failed even though Democratic presidential candidates -- Sens. Hillary Rodham Clinton (N.Y.), Barack Obama (Ill.), Christopher J. Dodd (Conn.) and Joseph R. Biden Jr. (Del.) -- returned from the campaign trail early yesterday morning to support the bill. They rushed back to Iowa in time for a debate yesterday afternoon.

The 59 to 40 vote in the morning, one vote short of the margin needed to end debate and clear the way for a vote on the measure, came after warnings from the White House and Sen. Pete V. Domenici (N.M.), the ranking Republican on the Senate Energy and Natural Resources Committee, that Bush would veto the bill because of the tax component.

Nine Republicans voted in favor of ending debate, and one Democrat, Sen. Mary Landrieu (La.), voted against it. Sen. John McCain (Ariz.), who is seeking the Republican nomination for president, was not present.

Before the vote, Senate Minority Leader Mitch McConnell (R-Ky.) said Democrats had "shown how to snatch defeat from the jaws of victory" by "inserting an enormous tax hike, a tax hike they knew would doom this legislation."

But Reid said Congress is an equal branch of government and should not be intimidated by the threat of a White House veto. "We are the Congress of the United States," he said. "We can write things even though the president may not like them."

Democrats had argued that the tax measure, including about $13 billion raised from the oil industry, was modest and simply took back tax breaks that oil companies had received, along with other manufacturers, in 2004 and that they did not need with oil prices around $90 a barrel.

"The future just failed by one vote. The past was preserved," Sen. Richard J. Durbin (D-Ill.) said after the vote. "The oil companies are now celebrating in their boardrooms."

Republicans said higher taxes on oil companies would not help lower prices for consumers.

The American Petroleum Institute issued a statement saying, "We applaud the Senate for recognizing the adverse effect that increased taxes would have had on future energy supplies." API said it still opposed the biofuels provisions, which it called "unrealistic."

The version of the bill approved last night did include $1.46 billion in revenue increases to offset an estimated $2 billion that would be lost in gasoline taxes as a result of improved automobile gasoline mileage.

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